Quick Facts

In the late 1980s, Uganda became one of the first countries in Sub-Saharan Africa to begin liberalizing its economy and introducing pro-market reforms. This effort has stagnated in recent years, however, and despite more than a decade of relatively strong economic growth, the number of impoverished Ugandans has changed little as the population has doubled since 1990.

Economic Freedom Snapshot

2016 Economic Freedom Score: 59.3 (down 0.4 point)

Economic Freedom Status: Mostly Unfree

Global Ranking: 102nd

Regional Ranking: 13th in Sub-Saharan Africa

Notable Successes: Trade Freedom and Monetary Freedom

Concerns: Business Freedom and Rule of Law

Overall Score Change Since 2012: –2.6

Corruption persists even though laws and institutions are in place to combat it. Enforcement of Uganda’s intellectual property laws to prevent piracy and distribution of counterfeit products is limited. Much of the population works in the informal sector due to a rigid labor market.

Background

President Yoweri Museveni and his National Resistance Movement have ruled Uganda since 1986 when Museveni, at the head of a rebel force, toppled President Tito Okello, who had seized power in a 1985 military coup. Frustration with Museveni’s long rule has grown, and elections scheduled for 2016 will provide an important test for democracy. Uganda has significant natural wealth, including gold, recently discovered oil, and rich agricultural lands from which more than two-thirds of the workforce derives employment. Uganda continues to play an important regional role in peacekeeping operations in Somalia and in the fight against terrorism, but the U.S. and others have criticized its intervention to prop up the president of South Sudan against rebel forces.

Although Uganda has a variety of laws and institutions tasked with combating corruption, enforcement is very ineffective. The country’s fiscal deficit is due in part to weak control of public spending. Despite recent high-profile scandals and anti-corruption campaigns, no top government official has been imprisoned for corruption. The rule of law is weak. Up to 90 percent of all landowners lack registered title to their property.

The top individual income tax rate is 40 percent, and the top corporate tax rate is 30 percent. Other taxes include a value-added tax and a property tax. The overall tax burden equals 13.4 percent of total domestic income. Government spending has decreased to a level equivalent to 16.8 percent of GDP. Budget deficits have been expanding, and public debt is around 30 percent of total annual output.

There is no minimum capital requirement, but establishing a business still takes more than 30 days. Completing licensing requirements costs over eight times the average annual income. A functioning labor market is not fully developed. The Uganda shilling’s depreciation against the dollar in 2014–2015, coupled with increased public debt and expanded spending in advance of the 2016 elections, is likely to drive up inflation.

Uganda’s average tariff rate is 8.6 percent. Foreign investors may lease but not own land. The government may not expropriate property without providing compensation. Regulatory barriers may discourage investment. Access to financial services has expanded gradually across the country, but the development of a modern financial sector has largely stalled in the absence of needed structural reforms.